How Raj Sheth Went from Growing to Buying SaaS Companies
Raj Sheth is the founder and CEO of Decalab, a SaaS factory' that buys SaaS businesses that are doing between $1M and $3M ARR and helps them to grow faster and more efficiently.
In 2020, Raj acquired a SaaS data migration company called FlyData. He turned that business around and sold it just over a year later for a 3X return on his investment.
But it took a long time for Raj to have that kind of success.
In 2006 he launched his first B2C software company which failed. A couple of years later he launched another B2C software company which also failed.
In 2011, Raj co-founded RecruiterBox, a recruiting SaaS product which he and his co-founders grew to over $4M ARR with around 3,000 customers.
They went on to sell that business to a private equity firm, but it took them 7 years to get there. So it was by no means an overnight success story.
In this interview, we deep-dive into how the co-founders built RecruiterBox. We talk about how they used SEO, paid media, directory listings, and all kinds of other things to grow the business and the lessons they learned along the way.
I hope you enjoy it.
Click to view transcript
[00:00:00] Omer: Welcome to another episode of The SaaS Podcast. I'm your host Omer Khan and this is the show where I interview proven founders and industry experts who share their stories, strategies, and insights to help you build, launch and grow your SaaS business.
[00:00:24] In this episode, I talk to Raj Sheth, the founder and CEO of Decalab, a SaaS ‘factory' that buys SaaS businesses that are doing between $1M and $3 million in ARR and helps them to grow faster and more efficiently
[00:00:41] In 2020 Raj acquired a SaaS data migration company called FlyData. He turned that business around and sold it just over a year later for a 3X return on his investment.
[00:00:56] But it took a long time for Raj to have that type of success.
[00:01:00] In 2006, he launched his first B2C software company, which failed. A couple of years later, he launched another B2C software company, which also failed. In 2011, Raj co-founded, Recruiterbox a recruiting SaaS product, which he and his co-founders grew to over $4M in ARR with around 3000 customers. They went on to sell that business to a private equity firm, but it took them seven years to get there. So it was by no means an overnight success story.
[00:01:34] In this interview, we deep dive into how the co-founders built Recruiterbox. We talk about how they used SEO, paid media, directory listings, and all kinds of other things to grow the business and the lessons they learned along the way.
[00:01:48] So I hope you enjoy it.
[00:01:51] Raj, welcome to the show.
[00:01:52] Raj: Thank you, Omer.
[00:01:53] Omer: Do you have a favorite quote, something that inspires or motivates you or just gets you out of bed that you can share with us?
[00:02:00] Raj: Not all those who wander are lost because I've done a lot of wondering in my time.
[00:02:06] Omer: Okay. Well, hopefully we'll get into that as we talk about your story.
[00:02:09] So tell us just a quick, a little bit about Decalab. What is the business. It's a little different to a traditional kind of a SaaS business. So just give us an overview of what's going on there.
[00:02:20] Raj: The best way I can describe that lab is it's a SaaS factory. So what I mean by that is we are acquiring companies between one and $3 million in annual recurring revenue. These are B2B software companies, SaaS products. And for multitude of reasons, either they have hit a bottleneck or the founders are looking to move on or they are pivoting, or they are in their current strategy that dependent on too much capital or whatever be the reason, we, Decalab is buying these companies, giving these founders a liquid cash exit, and then we are getting better and better at trying to get these companies from one to 10. So that's why I call it a factory floor because we want to probably own just five or 10 of these. And as a collective, get them to $100M in ARR, efficiently without venture capital.
[00:03:15] Omer: So your story, I think for this. Interview probably starts about 15 years ago when you started, you founded B2C startups and both of them failed. So maybe let's start with that. Just tell us a little bit about what those two startups were.
[00:03:35] Raj: Yeah, yeah, absolutely. I graduated undergrad in all three and a lot of us, I was super excited about the internet that done a couple of small student businesses website while in college. And then after I worked for three years or three or six at EMC square, I was like, Hey, there's only one way to pursue doing my own thing. The only way I learn is by actually doing it. So again, like most people, I didn't have any experience with B2B, but I was super fascinated by filling up your stadium, so to speak right.
[00:04:10] With, with a lot of people. So the first B2C company was actually a Craigslist for India was a classified portal, which I started in 2006. It basically, it was exactly like Craigslist, so people could buy and sell a lot of things that they were not using in a second market from their homes. It did get to a few thousand users and transactions, but I had no revenue model.
[00:04:33] I had no team that was actually building products and features I had just a freelancer as a programmer and it was hard lessons, but in hindsight, it would have helped to have a little more guidance, more support, maybe a co-founder. And that was a two, two and a half year journey. So my savings ran out and I kind of just put that platform on the back burner.
[00:04:58] And taking from the lessons of it. I was like, Hey, let's, let's see if we can get a little more defined with the supply side and the demand side. So then the next B2C company was also a marketplace, but this time, I don't know if you've heard of blue Nile here in the U S and there are a couple of those below.
[00:05:16] But this time I had, I was intimately familiar with some folks and friends that were in the high-end diamond manufacturing, jewelry business. There's a big hub in Israel, in India and Belgium, et cetera. And a lot of these folks were wholesalers. So my value prop to them was that, Hey, why don't we put part of your inventory in on demand online and folks can directly the end customer can directly buy.
[00:05:43] And there were a lot of hard hitting lessons that as well for support, we had about seven manufacturers, I would say, but they're finished inventory, which is the actual designs of the jewelry. We probably had around a hundred SKU I guess, is what they call it in the e-commerce world. So we had about a hundred products on then.
[00:06:04] What we realized is that was really hard to get the supply side to commit on an ongoing basis because their core business was like wholesale and distribution manufacturing for them to commit to having a variety on here. And of course it was super hard to even get the demand side, to come to the website, but stay engaged with the static base.
[00:06:28] And even though I didn't have a cost of inventory, I was unable to get that flywheel going as well. And this was 2008, 2009. So it wasn't the best time either, but that till the end of 2010 is what I was, where I was doing that. And that's where. A lot of the supplier support was dwindling. And plus I didn't have a lot of traffic on the website, so yeah, those are my two disaster stories about,
[00:06:55] Omer: Were you based in India at the time? Because I think your first job was in Boston, right?
[00:06:59] Raj: Exactly. So after I was in Boston for seven odd years, but for these two, those five years, I was in India. Yes.
[00:07:07] Omer: Got it. And then 2011 is when you co-founded. Recruiterbox, which is a B2B, SaaS product that you worked on for about seven years. And then eventually that was acquired. So tell me about how you came up with the idea for that product.
[00:07:26] Raj: Absolutely. So this was the one that stuck actually before the idea what happened is the biggest, hard, hitting, hard hitting lessons from these tour that I, I want to be quick to revenue, have something that was super tangible and did not rely on only fly with. Meaning I went to one customer solve the problem with one product they would pay. That was our introduction to B2B SaaS. And what was even more important is around that time I met my two co-founders and they were you know, engineers, one was a backend engineer, one was a front end engineer and they had basically built a couple of products, but not had an till that point had much traction either.
[00:08:09] And when the three of us met, we really hit it off because they wanted to do this global SaaS product. They felt that they were building the product, but didn't know how to get it out there. Whereas I was lacking in building a tech product myself and so we teamed up and the how, the way the idea came about was a little bit of an accident actually.
[00:08:31] The primary pieces was that, Hey, when we were looking for jobs, there has to be a better way than just job titles to find a fit, right. There has to be other things, other characteristics that we can search for, but we were like, Hey, how would we go about that? So, when we talked to a few companies, we realize that the first point of where the job originates at a company is potentially it's careers page it's careers webpage, or at the time, which we were not very familiar with the applicant tracking system.
[00:09:05] And so we went about trying to solve that problem, that what is the biggest pain for a lot of companies and startups and small and medium companies, when they are hiring and back then the overwhelming feedback we got because we want often with enterprises. And that's an important point we were talking to the mid market was that they were just using email and spreadsheets to manage that hiding process.
[00:09:31] So we got focused and fixated on that problem. And we said that, Hey, it's impossible to receive like 400 finder resume attachments on email and sift through all of that. And sounds like a nightmare. So we created at the time, we didn't even know the term, but we created like the easiest to use training free applicant tracking software, which anybody could just get self-started with log-in and they didn't have to use email and spreadsheets anymore. And finally, that turned out to be any enterprise HR software, because we didn't enter the problem that way. So we got lucky with having that first principles approach.
[00:10:10] And that's stuck. So we added, we started adding customers and revenue, and before we knew it, we were making this product better and selling it completely, of course, without a sales process online. So we had a lot of customers discovering us through at that time, Google app, marketplace, Chrome web store, SEO, et cetera, and by making the product.
[00:10:33] But then we went from, I think, a 100K in 2012, to 300K in , 2013 to a million in 2014, 2 million, 2015. So we kept tripling and doubling revenue and finally had that predictable revenue model. And of course, that company went on to our seven years to have 50 employees. We had a distributed team even then.
[00:10:57] So we had 16 folks. And by the way, for most of that period, I was then back in the U S I was in San Francisco because we were also exploring should be applied to an incubator, should be raised fund. Should we go up market? We never ended up raising funds. We just kept focusing on the product and the revenue.
[00:11:16] And finally in six and a half, seven years in, we've got, of course, you know, looking at a couple of adjacent products as well, because we felt that when the SMB space. We didn't think we would break all the way to 50 or a hundred million revenue. So when private equity came knocking and we had also honestly poured everything back into the business all seven years, so it's not like we are taking any dividends and it was just the three of us, no investors.
[00:11:43] When private equity came knocking, we decided to sell it. It was a clean all cash exit. And that's what we did.
[00:11:49] Omer: How much revenue was the business doing when you sold it, like it was in 2018.
[00:11:54] Raj: It was yeah. End of 2017, early 2018. It was between 4 and 5 million. It was around, it was closer to 4 million.
[00:12:02] Omer: In ARR?
[00:12:03] Raj: In ARR yes.
[00:12:04] Omer: So tell me a little bit more about that. Number one is you talked about this started from, it was like an accidental fine, because you were really thinking about it from the perspective of finding a job, not building software to solve the problem for recruiters, but once you had these ideas, how did you go about validating it?
[00:12:23] Raj: We talked to three or four companies and they were like, Hey, there's no way I can go through all these resumes. So V we literally didn't even build out the whole product flow. We didn't design the opening section and the candidate section, we didn't design the onboarding. All we did is we built a shed inbox to sort candidates. So there was only less than half the product.
[00:12:49] How we validated it as we talked to the 5 or 10 companies and we were started cold building, they were dogfooding the product as we built it. And what was super exciting about us. And since then, like we all know how hard this can be, but I think the first person was paying the first revenue three months after any code was.
[00:13:11] So that's how we validated it. When somebody, when the first person paid for it. The other three or four were paid for it five or six will paid for it. And then we knew it was a valid.
[00:13:19] Omer: So you had this sort of initial group of customers or who were dogfooding. And beyond that, you talked about a few different channels that you use to, to grow and acquire more customers, which one of those works best for you. And also I want to dig into what were some of the ones that didn't right, because it's easy to talk about. Yeah, we did X had this amazing success, but there's a lot of experimentation and trial there that goes along with it.
[00:13:45] Raj: Absolutely. Absolutely. So actually let's put this all on a timescale. Sometimes you're not able to break through certain ARR levels. You get stuck because the channel is just not, doesn't have enough juice in it. So either it's a 100k or 300K or half million, and sometimes it takes a long while to just break that first million and then you can even get stuck at two, et cetera.
[00:14:08] So 2011, 2011, June, 2011, June is when we started it. And I'll talk through those channels of earlier. But to be honest, it took almost two, almost a year and a half or two years. So in 2013 is when we were ranking in the top two or three organic results for applicant tracking software recruiting software recruitment software.
[00:14:35] Okay. And those had pretty healthy search volumes in, in, in the thousands, like closer to 10,000, which was pretty decent. So 2013 to 2016. SEO was a primary channel that brought in most of the games, but let's go back to the building blocks till then, because SEO was a lot of experimentation. A lot of site redesign a lot of great content.
[00:15:00] And then other things happened in the e-course as well, which is Google had this Panda update or something which penalized all of the other bigger sites because they had. You know, a lot of, either bad content, black hat, whatever. So they fell away. But because we had only built our, not from an SEO lens, but just from a helpful lens, we were rewarded.
[00:15:22] And there was no, it's not that we really planned for that. Or we engineered that, but that was a great thing that happened, but we both plugging away at everything. We knew how to do for a SEO for a year and a half before that. But the first 25, 30 customers. It was a combination of three or four channels.
[00:15:41] One is, and this is not the same anymore, by the way. Now people might be thinking Google Suites, et cetera. But if you remember back in 2011, there was Google apps, marketplace. I don't know if that's there anymore. Where you could, you didn't have to have any integration with Google, but you listed your product and it just literally linked out to your own website.
[00:16:02] So we got a few customer, we got a trickle every month from Google apps marketplace. We always got sign up some Google apps marketplace, right? From the time we put it up on there, which was the second or third month, there was also Chrome web store. And this is again, not a Chrome plugin, but back then, they used to be like Chrome web store and we could list our business app there. Both were free listings, by the way. And then it, we were just linking out to a website.
[00:16:29] Then there was a long tail of, there was something called HARO – Help a Reporter Out, where every day I used to write, I used to write two related things so that we would get a link or a mention or something contextual.
[00:16:41] And if you, I don't know if you saw my medium, but I've put a whole list of press we got, which was still sparse. But I remember in 2011 we were covering. By MSNBC, there was a new segment. Like we want television and we didn't even request that or obviously we didn't ask for that, but they found it interesting on one of the hat or things and they picked it up and then we also got to do a guest author thing on the online version of the New York times. So every month, and these were all the things that didn't scale by the way. So they didn't add that much really, but they kept giving us a burst of traffic all the way through. And then we also had, and this kind of connects back to the SEO, but we had a blog on recruiterbox.com.
[00:17:28] We had a blog, which had a lot of interviews. We were putting a lot of checklists. So content was a big part of it as well. So we poured a lot of our efforts on the marketing side. Not necessarily on, on anything on the sales side, till 2015, I would say four years in. But as we were like almost a 2 million, when we started the sales stuff, because till then it was all those channels.
[00:17:52] And once we had money, by the way, we also were doing capterra.com. These are all paid listings. We were doing getapp.com and we were doing Google ad words. We were doing retargeting ad roll. That is so all of this was PPC paid advertising, which is, I think that was after we had half a million in revenue. Till then we were pouring in all the revenue into a bigger engineering team..
[00:18:17] Omer: Okay. So that's a great overview of those early days. So I just want to get clear on a couple of things. So you said the first 25, 30 customers came from those three or four channels that you mentioned the Google apps marketplace, you got listed in there, but are you saying you didn't actually have a Google apps integration, but you were still able to list at the time?
[00:18:42] Raj: Yes, it was and again, some of, some of the listeners might remember there's so maybe they used it, but yeah, they had this thing called Google apps marketplace. I don't think they have it anymore. And that had nothing to do with the G Suite integration because we didn't have one at the time. I distinctly remember.
[00:18:57] Omer: And then you also got listed in the Chrome web store, although you weren't a Chrome extension.
[00:19:03] Raj: Yeah, by the way. So we went and listed ourselves there by the way, because they wanted app businesses.
[00:19:10] Omer: So it sounds like basically you were trying a bunch of different things, just getting the word out, getting the product listed wherever you could, the HARO thing in terms of help a reporter out that I haven't heard of a lot of SaaS founders doing that, but what we did you say you were like trying to, you were like reaching out to journalists, like everyday?
[00:19:36] Raj: Yeah. So what happens is I think that site is still around actually, but if you go to help, yeah. If you go to helpareporter.com, what happens is you put your own profile as somebody who can answer some questions.
[00:19:50] Yeah. I'm with source, I'm actually looking at the website right now. And you list yourself as a source and then they have a daily newsletter and there are a bunch of things in there. You have to list yourself as a source, but also put your profile and put some context in that. Like for example, My feed wouldn't have things on environmental law, for instance, because I don't know anything about that, but I would put a few categories of things, hiring recruiting, business, marketing, small business growth, lot of those things.
[00:20:19] And then I would basically look at that list of 25 things a day. They will probably one to two that I could genuinely add some value and probably the response would be appreciated or included. So, yeah, that's what I did.
[00:20:34] Omer: So let's talk about the paid acquisition. So you, you tried a bunch of different things, the content focus and slowly the SEO was starting to kick in, or although it obviously didn't happen that quickly.
[00:20:48] How much were you spending to, what was your CAC in terms of paid acquisition and was that something that worked for you quickly or did it take some time to figure out? And I asked that because I know some founders have had some great experiences where they're like, yeah, I put up some Facebook ads and I got a customer the first day and the majority of, yeah, I've tried paid ads and nothing ever worked. So where did you fall in this spectrum.
[00:21:17] Raj: I was more in the second bucket to be honest. So I said, let's break it down. So first I'll talk about the CAC and then we will do the breakdown of what was paid, what was organic. So in, if you look at starting 2013, we had a good flow of between 25,000 and 30,000 close to 30,000 visits to our site, which we were very happy about because 0.3% or sorry, 3% of that traffic. So a thousand was signing up for the free trial and then out of a thousand that were signing up for the free trial, a hundred, what converting to paying customers every month. Now keep in mind we had a relatively. Long tail, small business audience, and they were on average paying us a hundred dollars a month to be at a hundred people, a hundred dollars of you adding 10,000 MRR, new MRR every month.
[00:22:13] Now and in a thousand signups, we're not always sales qualified leads as you would call them, or even marketing qualified leads. There was some strain that as well, people would just sign up out of curiosity and things like that because we had made it really easy to sign up. Now the 30,000 thousand sign up if you look at that, waterfall or windfall was very SEO, organic skew. Now we were obviously trying to get higher intent folks signed up with a paid advertising and throughout us experimenting with the paid advertising. It was probably at the very start when we were only. A hundred, 200, 300K ARR. We were spending $3,000 a month.
[00:23:04] And the first lesson in PPC was because it was getting so expensive on Google Ads and Capterra. And we had this heavily funded competitors in the same words who had taken a seven, $10 a click, just to give you a sense. And that's where everybody probably should have always kept buying Google stock $7, $10 a click.
[00:23:27] By the time we sold the company was $65 a click, if you can believe it. So, so when you asked me how was paid, I very honestly remain confused still till this day. All of it. Right. But I'll still give you the data analytics and you'll know why I'm saying that. So the first lesson was that 3000 a month was not a statistical enough number.
[00:23:52] And that's the lesson. We got an advice we got from a lot of people and that number needed to be more 7 to 10,000. And when we started spending 7 to 10,000 at a slightly higher revenue level every month, 10,000 every month., Then we started getting some that, Hey, we seem to be paying 750 to a thousand.
[00:24:12] We seem to be paying up to a thousand dollars to acquire a pain. And then you would be like, okay, they're paying you a hundred dollars a month. And lifetime value is four and a half years, so that's fine. But you have to then get the true lifetime value because there were some that would also churn to be had to filter out.
[00:24:29] All the leads from the paid ads and what is the aggregate lifetime value? And, you know, the thousand dollars. Do we have better channels or sometimes what we did because we were not funded. We did a round robin. The also second lesson was first lesson was you need a statistical number. Like some people do on hybrid words. If you're only doing $500,000 a month, you won't get enough learning and data, second lesson, you can't do it for a month or two months and say, oh, it didn't work and stop.
[00:25:01] So that was a second hard lesson that you have to do these, I would say to a lot of people who are like on the fence right now, I would say at least two quarters. I know it's painful, but you will realize that you need six months of data because sometimes. Even if you don't have attribution, you're like, no, this lead didn't come through Google AdWords, what you turn off the ads. And then the next two months finally a lower. And then you're like, well, the only thing I changed as I turned up the ad, but it's not showing in my attribution.
[00:25:31] So that was one more, one more lesson for us. Right. So you got to do it or a significant amount of time, make sure your attribution is teed up right. Which even for any of our. To this date can be a little bit of a challenge, challenge with Google Analytics and HubSpot. So, yeah, sorry. I can go on and on paid ads, but at scale, believe it or not, we had gotten up to spending $30,000 a month on Google Adwords, retargeting, LinkedIn, and we were up to $30,000 a month.
[00:26:00] Sure we were still, the more you spend some lens, the efficiency gets worse. Depends on the channel it's dynamic, right? It depends on the channel and depends on what everybody else is bidding. So I think that thousand also didn't remain thousand. It started getting pushed up to 1500, 2000, which is also why we were considering just going up market because the product has also improved a lot.
[00:26:25] And we also realized that, Hey, we released. Problems for people who are hiding all the time, not just for seasoned hiding folks. So there's a lot of lessons, a lot of punches, a lot of slaps, I would say, but yeah, that's that PPC was a integral part of the learning.
[00:26:43] Omer: Let's talk a little bit about up-market. So you just explain that you were getting a lot of churn or there was a churn problem with the SMBs that you were targeting at a a hundred dollars a month and the product was getting better. And there was a, certainly you guys saw an opportunity to go up market and as I understand, you shifted it to more can focuson 3K a year product, is that right?
[00:27:11] Raj: 3k to 10K and believe it or not, there was never were even customers that then only one or two painters, like 50K a month, because we had like stuff done for them in a separate sort of server. They had high volume, some other features for them security. but yes, 3K.
[00:27:29] Omer: Help us understand, like, how did you make that transition? Like you've got a business it's, it's working well, you're acquiring customers, it's growing and it's can be a scary to then say, we're going to go after something else.
[00:27:44] Raj: You know finally, Omer. The truth is we never made that transition. Yes, we attempted the transition, but that transition was never made. So I know since then the folks that have bought us made that transition completely. They don't even have the a hundred dollars. They don't have the sign up. They only have demo only to talk to a sales team. Right. So forget that. But when we, were making that transition, our transition was to just fork. We did two things to start with a, we started going outbound.
[00:28:14] We started going outbound. We got good. I got good at the mechanics of the outbound campaign, but what I realized is that we had a positioning brand problem, right? Like it's not just about going outbound and telling people about features. And we just realize that when one of our competitors raised a lot of money from a name, the VC, and went to the talent point person at the several VC funds and said that, Hey, we do data driven recruiting. And finally the, the word data driven recruiting just seemed to make a lot of sense to a lot of people, even though other feature set was the same. So I it's just like, this was a marketing positioning problem. That's the one thing they learned, but let's put that on the side. When we were in that transition, one of the things we started doing in the funnel is we said, Hey, we're going to now for people in the onboarding, like if you are a company, if this is the persona signing up, if you're at this size company, then you continue just using that product and all as well. And you just don't want us in the way. Anyway. And folks that were HR team that has an RFP, or they are anyways going to look at the three or four products.
[00:29:27] They anyway used to request a demo. So it's not like they were to suddenly be like, oh, I'm appreciating the sense of onboarding. I just want to get started with that. They can't get started like that. They're still trying to, they're going to commit to one and three products and they need to basically have that beauty contest and they had the list and they need to check that list, et cetera.
[00:29:47] So we started doing that transition. We started pushing the annual plan. But we could not make still, most of our revenue was coming from the self serve business and we didn't have very meaningful traction in, in, on the other side of the pond. And of course we have a hundred lessons from there since then we've put them into play. But to answer the question accurately, we didn't really make that transition.
[00:30:12] Omer: The, so you sold the company in 2018 to a private equity firm. And then in, it was in 2020 that you made your first acquisition through Decalab, which was a company called Flydata. What did the product do? Who was it for?
[00:30:34] Raj: Basically when, imagine an e-commerce company, a FinTech company, video gaming, any big site that has a lot of data. They have a lot of signups, a lot of transactional DBs, so not to go super technical, but even I can explain it in layman's terms that what happens is when when a company's database, they might see sequel post grades in hundreds of millions of rows.
[00:30:59] You can't run analytical queries right on that database, or even on a read replica or 10 or the last 10, 15 years. These things call these things called data warehouses came about, right. Amazon, AWS has one called Redshift. Google has one called BigQuery, and I'm sure you, you must have heard of snowflake.
[00:31:21] Like they recently went public and it's been like a very popular company and start growing very quickly. These things are called data warehouses. In simple words, what they do is you move all your data, like your data from your transactional databases and your data from your Salesforce or whatever you move it to your data warehouse and the same query that would take you nine hours on a transactional database.
[00:31:44] Now on this analytical database takes only nine seconds, right? Because your data is stored differently and that's what a data does. Flydata are the pipes. They are, the industry speak for it is ELT extract, load transformed. So the Flydata, think of it as a Zapier for big data. So like there are pipes that take all your data, all your signups that's coming in, et cetera, and real time.
[00:32:13] And replicated and sync it to your data warehouse. So if different parts of the business, when they are running real time, analytical queries, oh, I'm spending a million dollars a day on advertising. Is it working? What happened in the last five minutes? I'm a FinTech app. What happened with us transactions when analytics is super crucial businesses use bought something like flight data to pipe the data, have it be part of the infrastructure and basically they're using these data warehouses. So we sit on top of the data warehouse, hope that that's very helpful.
[00:32:44] Omer: So how did you find this one? How did you find this company and how did you, what was the decision process?
[00:32:51] Raj: I did a search, honestly, on Crunchbase. I did a few searches, but I did one search of companies that had raised money four years ago or early in San Francisco, but had a team size of 10 or less. It was just my rough rudimentary way of searching for companies that had not done the bencher scale. If somebody had money four or five years ago, my guess would be typically they would have one or two more rounds after that. And they would maybe have60, 100, 200 people. I got a list of companies and then I send them an outbound campaign, like a super-friendly founder, the founder, not being very honest that, Hey, I've had one exit of some capital and I'm looking to buy a company because this is the model that I'm thinking of pursuing and perfecting.
[00:33:41] Finally I had so many replies from that I have 22 zoom calls scheduled within the first three days of that campaign going out. And I spoke to 22 people, a lot of the businesses, to be honest, I would not have been able to understand them or do justice to them, but I love listening to the story. We were troubleshooting where they go from here.
[00:34:02] And some founders were just, they were just stuck there that maybe they had raised around, but not really gotten to product market fit. Some had got into product market fit, but not to scale. And they just had some flatline growth and some had problems with their VCs. And so it was great education for me actually, because yeah, I learned a lot doing hiring and doing growth some with Recruiterbox, but this was amazing because I, and I, I instantly also on a personal note, realized that I really enjoyed this.
[00:34:33] I really enjoyed like learning all these stories, et cetera. And then one of them was fly data and they had raised 9 million previously attempted to three products. The founder was a phenomenal, great engineer. He was like a 10X engineer, but somehow done the two, three products, which are not worked. And all that was left with this one core product, which they had originally started which is called Flydata.
[00:34:56] And which I was explaining what they do. And they, what I, what instantly struck me is the business had very low churn. And so that was a big part of my desk because I was like, Hey, SaaS revenue. If the churn is low, can be so resilient that you get, you have time to learn. And then also it was a very large, it was well sub a million dollars in ARR and we were getting a fairly reasonable deal out of it because the investors are written it off anyway and the founder was looking to move on and do something very specific in virtual reality. So it was a win because I was taking it off their hands and it was a win for us because we instantly, since then in the last we redid the website instantly, we redid the SEO, we got some SEO traction. Then we realized the search volume is not that high though, but that was great to get that in shape and get a trickle going.
[00:35:49] And we rewrote large parts of the product, which I don't recommend that we don't want to do it again and again, but we had to because our product only integrated with Redshift, but now we wanted to integrate with Snowflake and BigQuery and you know get those connectors that's the natural next step.
[00:36:05] And we added a few customers and we started doing ads again and experimenting with that. And again, the ads have worked in a mixed way and yeah, it's been phenomenal because at the revenue, it was, the founder was keeping portion of it for a salary. But as soon as he left, I was literally at a pretty decent profits stage. And I just used that whole profit to put Decalab team on it and engineering team on it and outbound SDR team on it. And it's all been funded from the revenue. So yeah.
[00:36:36] Omer: So th the business I think, was doing about 500K in ARR when you bought it and had raised quite a lot of money, but there wasn't much going on.
[00:36:45] So you turn that from the acquisition, doing a turnaround, and then you selling that business took you about 13 months. And I know you said you got a 3x return on what you invested in that business. When you looked at Flydata, what made you think you could fix something that these guys that have been working on for 6, 7 years, hadn't been able to.
[00:37:06] Raj: You know, honestly, I don't want to position it like that or take credit. I had the honest answers. I had no clue. I had no clue. I was just looking at two things. Hey, I'm getting this at a great price. Okay. And if we screw everything up, it will sort of be a wash. It'll be a breakeven it'll pay for itself. So that was the honest notion.
[00:37:28] And then we didn't know because we actually enjoy this stuff. And finally, the intention was not to sell it or flip it 13 months ago, purely an accident. And I'll explain all of that in a second. So we just jumped in and we learned a ton about the space and did a partnership recently started talking to the Snowflake team and we've been talking to our customers and we like, like I said, originally one to 10, then why would I say that?
[00:37:55] Two or three things became clear to us. One, one, the rewrite took longer, but we were so glad because I'm, so these engineers are my original recruiter box engineers, by the way. And I was super I'm like thrilled with, they have been able to pull off. This infra product is a very different product and we had no experience in it.
[00:38:15] It will be very honest. So we didn't think that we could. And for that matter, when we are talking to any founders now for buying the company, we don't believe we can do it better than them, by the way. Uh, stick to certain basic things that when we buy a company, we are going to simply bring it to 50% a bit.
[00:38:33] So we will keep 50% of the costs, which is mostly the current team. So we bring it to 50% ever done, and we'll use the other 50% of the revenue for the growth of the business. And we look now we are smarter since the Flydata deal too, by the way, Omer, because I wouldn't do, I would say that almost screwed up a couple of things in Flydata because now I look for companies that at least have a 15, 20% net positive growth rate, whereas Flydata on declining growth rate at the time that's 0.1 0.2, I would love to pick things where we need to either do the heavy lifting on the growth funnel or the product.
[00:39:11] On Flydata, we had to do both, but which was okay, which was great. And then when this company, the Flydata it, as the only missing feature set in this company that has just bought us a couple of weeks ago, bought Flydata had a product that is. When they came in, we're like, no, actually it doesn't make sense for my model.
[00:39:30] And they were initially offering something that was, that wouldn't make sense for the work we put into it. And we should like really see it through for 5, 7, 10 years. That's how we are looking at it. But to be honest, when they, when the price went to what they ultimately ended up. We are like, wow, this proves out a model and we cannot look at the bigger picture and go do three companies, go buy three companies, not just with the scapula, but maybe even raise more money and buy these three companies because we are going to have a tough time.
[00:40:04] By ourselves. See, they already have 500 customers into which they're going to sell this product into, but getting a funnel going from scratch, where now that we understand the space, we're going to have a very tough time unless we put 150 connectors or the next two or three years, and that's going to be much more engineering, heavy lifting. Do we really want to expand the team, et cetera.
[00:40:27] So Flaydata was a great incubator for our model and it's super fortunate that we ended up getting three extra money. That's great. But we also learned a lot and we also made a lot of mistakes and it's just a fortunate, accident. I would say that I managed to get that deal and connect some dots. And I knew these people as well from the past.
[00:40:47] The, before the acquisition. Was this something that were you already thinking about acquiring other businesses or apps? Okay. So this was like , You acquire Fydata, but then you were like also thinking about doing other things. It wasn't like the acquisition made you rethink, oh, we should go out and.
[00:41:03] The original thought. If you see that original substack that I've written was right around the time we had just bought Flydata. Flydata was June was June, 2020. I launched my second big campaign in December, 2020, and I've already talked to, you know, 40 40 to 50 companies since December, 2020 till today, actually, which is amazing.
[00:41:25] And we were doing, of course, a lot of day-to-day work, heavy lifting on Flydata. The whole team is focused on flydata, and then I'm taking some time out every quarter or so to go deeper in the companies and perfect the pieces a little bit, get more of a bench commitment for people that are going to join the Decalab layer to run these companies.
[00:41:48] Absolutely we want to do because the true value is in the aggregation. I still feel that. And that's why Flydata wasn't an anomaly, but the point is not to flip these, not because we just want to keep doing them for 10 years, but I think the value is in the aggregation of revenue, aggregation of profit, taking profit from one company, putting it into the second, et cetera.
[00:42:08] Omer: Is it something that you find there are founders who are good at starting new things. There are founders who are good at scaling and growing large organizations. And I guess what you're doing here is a bit in between, which is taking something that's been started. Didn't really get off the ground, figuring out how to turn around and fix that and get it on a healthy path.
[00:42:32] Is that something that you've learned and found that you feel the most comfortable in? Or is this just because it's a great kind of a business model that you've come from across.
[00:42:42] Raj: Yeah, no, that's a great question. In the light preferred opted for the initiating, something from scratch and creating something from scratch finally,, before we found a flightdataa well, of course, because our team's still there.
[00:42:58] So we banged out one product and we of course loved doing that. But during the flydata I experienced, to be honest, I realized that I actually really enjoy looking at something. And seeing what can be different. So absolutely. We enjoy this. I wouldn't go as far as to say right now that we are good at it or be a better at it.
[00:43:20] I think that remains to be seen to be super candid. But I actually do love seeing this and yes, I think it's more efficient as well. Unless you have very high conviction that you are going to take something from scratch, and I'll give you an example. The zoom founder created zoom, but let's keep in mind that he had.
[00:43:42] He had been in that same industry, creating that same products for 10, 20 years before zoom, if I'm not mistaken. And he had already sold a company in that exact space. So he had that domain expertise for us, unless we are super high conviction that, Hey, we're going to exactly play in this space and we will hit product market fit.
[00:44:01] I also see, I also feel that this is a more predictable, more efficient business model to get 100 million in revenue where the products show might be different, but the characteristics of the business are all the same. They all need SEO. They all need great onboarding. If they're self serve products, they all need amazing support and success.
[00:44:21] They all need a certain kind of outbound sales. So we enjoyed that whole production line. So to speak on that factory.
[00:44:28] Omer: Yeah, it's certainly an interesting 99% of the founders I talked to are obviously building businesses and there is is a different kind of challenge, but yeah, this has been really interesting to hear about your experience and your plans.
[00:44:42] And then the way you're thinking about this, we should wrap up here. So let's go into the lightning round. I'm going to ask you seven quick fire questions. So just try to answer them as quickly as you can. Okay. What's the best piece of business advice you've ever received
[00:44:55] Raj: Solve a problem that you've had firsthand.
[00:44:58] What book would you recommend to our audience and why?
[00:45:02] The Everything Store, which is a book on Amazon. And what was super striking to me is Jeff made so many mistakes, but was still able to build an amazing company. And that's because they just took a lot of action quickly and experimented fast. So the Everything store.
[00:45:21] Omer: What's one or characteristic in your mind of a successful Entrepreneur? To action ratio, no matter how intelligent you are, make sure you're taking more action than just thinking in depth.
[00:45:33] What's your favorite personal productivity tool or habit?
[00:45:38] Google calendar. I'm a calendar phene and I love being on time and having everything on the calendar for the day.
[00:45:44] What's the new or crazy business idea you'd love to pursue if you had the extra time?
[00:45:48] Raj: I would do, I would want to do a marketplace for people who are lonely in their 50, 60 seventies to send them a buddy for social time.
[00:45:59] Omer: What's interesting or fun fact about you that most people don't know?
[00:46:03] Raj: I tried to be a full-time actor between the failed businesses.
[00:46:08] Omer: And finally, what's one of your most important passions outside of your work?
[00:46:12] Raj: I like writing, just writing down my thoughts, writing poetry, and also, yeah spending time with my family
[00:46:18] Omer: Thank you so much for joining me. It's as I said, it's been really interesting to shift gears and talk a little bit of. Acquiring companies. And then how you're thinking about that. And obviously you've got two great examples with a Recruiterbox, which you didn't acquire you foundedit and Flydata. So thank you for your time and for sharing some great insights lessons with us, if people want to get in touch with you, what's the best way for them to. do that?
[00:46:45] Raj: Raj@decalab.io. That's the email
[00:46:51] Omer: And if they want to learn more about Decalab, they can go actually decalab.io is your sub stack. Isn't it?
[00:46:58] Raj: Currently? It is. Yeah, the site is coming up. We've just been spending all our time on Flydata and getting that one.
[00:47:04] Omer: Awesome, you so much and wish you and the team, the best of success and look forward to hearing about your next few acquisitions.
[00:47:12] Raj: Thank you, Omer. Thank you.
[00:47:14] All the best, cheers.
The Show Notes